Europe PE price erosion eases after mid-May sell-off

LONDON (ICIS)–Price erosion in the polyethylene (PE) market in May is slowing down after a flurry of offers mid-month that brought down some grades by as much as €60/tonne, sources said on Thursday.

Not all low density polyethylene (LDPE) buyers were able to take advantage of offers as low as €1,200/tonne FD (free delivered) NWE (northwest Europe), and indeed some levels were still trading close to €1,300/tonne.

End-May and June offers were now considered to be at the same level, and some sources did not expect early-June pricing to go down further.

Much would depend on upstream movements, however. An erosion was widely expected for the June ethylene contract, according to PE sources, but higher crude oil and naphtha prices in recent days could temper that erosion. Margins were still high for cracker operators, so buyers expected PE prices to drop again in June.

May demand has been better than a very poor April, said producers, and activity was continuing throughout the month, they said, rather than coming to the mid-month halt they saw in April.

“Demand is better in May than April,” said one producer.

“We see activity,” said another. “From my perspective there is a fundamental difference compared to April. Business is still going on.”

A trader agreed.

“We are taking volume,” it said. “And we’re getting quite acceptable prices…there’s a difference between what they [buyers] say and what they do.”

Spot prices of most PE grades saw some sharp downward adjustment in May but levels were now largely stable.

For contracted volumes, early-month settlements showed a modest fall of around €20/tonne, but that became deeper until drops of up to €60/tonne occurred in some segments in mid-May.

Now, as retroactive discussions take place for May, several buyers said they were disputing a drop of around €50/tonne. Final numbers will not be known before next week, they said.

PE is used in packaging, the manufacture of household goods, and also in the agricultural sector.

Picture source: Source: Gene Blevins/REX/Shutterstock